FWIW.........
To: +nmsparky (1810 )
From: +nmsparky
Tuesday, Oct 6 1998 10:11AM ET
Reply # of 1812
Does this sound a little familiar?
SEC Charges 41 People in 13 Actions Involving More Than $25 Million in Microcap
Fraud
FOR IMMEDIATE RELEASE 98-92
Fight Against Microcap Fraud “Paying Dividends”
Washington, D.C., September 24, 1998 – The Securities and Exchange Commission
announced today the filing of thirteen enforcement actions against forty-one defendants
across the country for their involvement in fraudulent microcap schemes that bilked
investors of more than $25 million. Some of the fraudulent schemes involved bogus
medical "breakthroughs," sham hotel renovations, phony stock certificates and the stock
manipulation of on-line department store Shopping.com.
In nine injunctive actions and two administrative proceedings the SEC alleges that the
defendants violated the antifraud provisions of the federal securities laws by manipulating
thirteen microcap stocks. In many of these cases the defendants engaged in "pump and
dump" schemes and manipulated the stock price of microcap companies by
disseminating materially false and misleading information about the financial condition,
business relationships and future stock price of those companies, among other things.
SEC Director of Enforcement Richard H. Walker said, "We are dedicated to ferreting
out and prosecuting those who prey on innocent investors. Our actions against the scam
artists charged in today's actions, who issue and sell these phony investments,
demonstrate that the Commission's coordinated attack against microcap fraud is paying
dividends."
The defendants in these cases profited from the fraud, often by selling cheap insider
stock after pumping up the stock price, receiving a total of approximately $25 million in
ill-gotten gains. Among the schemes:
A Florida company allegedly in the business of building golf practice facilities instead
taught its investors an expensive lesson. The company was really running a Ponzi
scheme, cheating more than 350 investors in 16 states out of approximately $15 million.
(SEC v. James T. Staples, et al.)
A Utah company claimed to have developed a new data transmission technology called
"Digital Wave Modulation," and the company's stock soared from $3.50 to more than
$40 a share. Prices collapsed when the company failed to produce a promised
prototype, but not before the company's chairman and his children sold approximately
$3 million worth of their shares in this classic "pump and dump" scheme. (SEC v.
International Automated Systems, Inc., et al.)
A biotech firm in Las Vegas falsely claimed the company had an exclusive license to
market "breakthrough" medical devices. The company also lied about its efforts to
market a new line of nutritional supplements. (SEC v. Bio-Tech Industries, Inc., et al.)
Con artists in South Florida sold unregistered shares in bogus hotel renovation and
condominium projects. In fact, they printed the certificates themselves and kept the
money from their sale. (SEC v. VII Visionary Investments, Inc., et al.)
A Los Angeles area broker-dealer racked up more than $4 million for itself by rigging
the market for shares of an on- line retailer, Shopping.com. (SEC v. Waldron & Co.,
Inc.)
The Commission charged three defendants with publishing purportedly "independent"
news reports about 50 microcap companies that paid the defendants almost $400,000
in stock and cash to promote them. The newsletter was sent to approximately 60,000
readers each month. (SEC v. Hall, et al.)
SEC Chairman Arthur Levitt said, "Putting microcap fraudsters out of business is a top
priority of this Commission, and I am pleased with the progress we've made. Investors
can help this effort and protect themselves by asking tough questions, not giving their
money to strangers and reporting suspicious behavior. While securities fraud may never
become extinct, we are working to put microcap fraudsters on the endangered species
list."
Prior to charging the defendants in these actions, the Commission had suspended trading
in the stock of eight of the issuers involved in the pump and dump schemes for a single,
ten-day period based on the dissemination of false and misleading information about the
companies. The Commission's suspension of trading stopped the ongoing manipulations
and placed an additional burden on broker- dealers to update their files with accurate
information about the companies, pursuant to Rule 15c2-11 under the Securities
Exchange Act of 1934, before they resumed or began quoting the securities.
Preventing Microcap Fraud
The SEC encourages investors to get the facts before they invest. They should call the
SEC or their state's securities regulator to find out whether the investment is registered.
They should also ask their state's securities regulator whether the broker and the firm
are licensed to do business in the state and whether either has a history of complaints.
Investors should avoid being swept away by a sales pitch, especially one that promises
spectacular returns or emphasizes unproven products in development. They should learn
as much as they can about the company, including how long it has been in business,
what its products or services are, and whether it has made money for investors in the
past. If the investment is touted by broadcast or print media or on the Internet, investors
should ask whether payments have been made to promote the investment.
For more tips on how to invest wisely and protect against investment fraud, investors
should call the SEC toll- free at (800) SEC-0330 or visit the SEC's website at
www.sec.gov.
These enforcement actions are part of the Commission's four-pronged approach to
attacking microcap fraud: enforcement, inspections, investor education and regulation.
For more information about the SEC's response to Microcap fraud and the litigation
releases for each of these cases, visit the SEC's Microcap Fraud Information Center at
sec.gov.
The SEC acknowledges the valuable assistance of the staff of the National Association
of Securities Dealers Regulation, Inc. in referring a number of these matters.
_________________
Happy investing!
KZAP |
